Why you should go into debt to travel - The Backslackers (2024)

FAQs

Should you go into debt to travel? ›

The idea is this: if you dive into debt, it should only be when absolutely necessary, such as in emergencies. Putting yourself in debt for something considered a luxury, like travel, can impact your credit score and make it harder to take out a loan or credit card when you actually need it.

Debt that helps put you in a better position may be considered "good debt." Borrowing to invest in a small business, education, or real estate is generally considered “good debt,” because you are investing the money you borrow in an asset that will improve your overall financial picture.

I think being broke is the best reason to start traveling. When you have the fewest options is when you really have the most options. When you're at the bottom, you can only go up. As Janis Joplin said, freedom is just another word for nothing left to lose.

Set money aside for your trip before it happens by opening a separate bank account and setting up a savings goal. When it's time to take the trip, you can use the money you saved and make sure you aren't spending more than what you budgeted for the trip.

There is no "rule" that you cannot go on holiday during your debt management plan (DMP). But, there is a limit on what you can afford while paying off your debts. Your monthly DMP payments are based on what you can afford towards your debts. Any holiday needs to keep your payments affordable.

“Can debt stop me from leaving the country?” No, you can still leave. However, be careful which country you go to, because depending on where you go and what kind of agreements the two countries have… They (the debtors) may still be able to chase after you for their money.

In The Value of Debt in Building Wealth, bestselling author Thomas J. Anderson encourages you to rethink that. You'll walk away from this book with an understanding of how you can use debt wisely to secure the financial future you envision for yourself and your family.

It may sound like an intimidating term, but it really isn't once you know what it means. Here's a little secret: compound interest is a millionaire's best friend. It's really free money.

Key takeaways

Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.

Since this question comes up so often, I like to constantly remind people of this fact: You do not need to be rich to travel. What is this? Let's repeat that: You do not need to be rich to travel. There are plenty of ways to travel on a budget (and for free) — you just need to be willing to get creative.

Do poor people travel less? ›

Travel Distance and Travel Stay

As well as traveling less often, low-income individuals also travel shorter distances than people in higher income groups. The average (mean) trip roundtrip distance among low- income adults under 65 was 650 mi compared with 990 mi by high-income people.

Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.

At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.

Even these costs can be significantly slashed with strategic planning. Traveling around the world with no money, just with a backpack, camera, and toothbrush is my preference, reveling in the joys of minimalist travel. While budget travel may occasionally pose discomfort, the rewards are immeasurable.

If money is tight, consider whether focusing only on debt makes more sense. “If you are not able to make your payments — and like not even the minimum payments — and you're running in the negative every month, then you probably shouldn't be traveling,” says Grant. “Or if you do, something that's super low cost.”

Credit cards typically provide better exchange rates than what you'll get from ATM machines and currency stands. Depending on your card issuer, your purchases might automatically qualify for insurance. This coverage doesn't simply apply to consumer goods — it also covers travel delays and lost luggage.

Cash is the best — and sometimes only — way to pay for bus fare, taxis, and local guides. If you'll be shopping a lot or settling bills at pricey business-class hotels, you might use your credit card more than I do — but you'll still be better off using cash for smaller purchases.

If you want to travel for six months at $50 a day, aim to save up a minimum of $9000 (180 days x $50). I highly recommend adding 20% to your final figure to give yourself some financial padding. In this scenario, a good target number for savings is $10,800.